tv Nightly Business Report PBS March 23, 2012 4:30pm-5:00pm PDT
>> susie: fresh signs that the housing market is still struggling as new home sales fall for a second straight month. meanwhile, bank of america comes up with a way to keep foreclosure victims in their homes. >> this program is not going far enough yet, 1,000 people is not enough, t we've go to make sure it works first. >> tom: and on wall street, trading in apple shares goes haywire as a bad trade triggers a circuit breaker. it comes as the regulators take a closer look at computerized high frequency trading. it's "nightly business report" for friday, march 23. this is "nightly business
report" with susie gharib and tom hudson. "nightly business report" is made possible by: captioning sponsored by wpbt >> tom: good evening. thanks for joining us. a stock exchange that is not a household name tripped up trading in apple shares and even stopped it's own initial public offering. >> susie: m, the exchange lledats. that stands for better alternative trading system. it's based far away from wall street in a suburb of kansas city. it's an all-electronic exchange accounting for more than 10% of
all stock trades. today the exchange itself was hoping to sell its stock to the public for the first time, but it got off to a very rough start. >> tom: as its own stock was beginning to trade, it was halted after just 15 seconds when prices plunged to zero. all the trades were canceled and the exchanged withdrew is initial public offering. at the same time, trading in apple stock was stopped for five minutes because of bad trades made on bats's own exchange. those bad trades were eventually cancelled after triggering rules put in place after the flash crash almost two years ago. one of the contributing factors of that astonishing drop of nearly one thousand points by the dow jones industrial average remains under scrutiny by the government's stock cops. the securities and exchange commission reportedly is conducting a broad investigation into high tech, sophisticated trading platforms linked directly to stock exchanges. the traditional trading floors seem quaint when compared to what's called high frequency trading. that's complex computer software
designed to buy and sell stocks in fractions of a second and often times the computers are hooked up straight to exchanges. larry tabb runs trading advisory firm, the tabb group. he's with us from boston. larry, quite a trifecta for the exchange. does it show the fragility of stock trading in the u.s. >> i thoht it was the opposite. i thought it shows the resiliency. right now their 13 equity exchanges. if one goes down the others can transition quicker than a heartbeat. that didn't help the ipo, but generally the market is resilient. if one market goes down, trading changes seamlessly over to other exchanges. >> tom: we've so we have a multditude of exchanges that can pick it up if wob is halted. but what about the direct
connections that high frequency traders have. does that give them an unfair advantage? not illegal, but unfair advantage? >> well, actually, it gives them an advantage, but not necessarily for retail investors. the market for retail investors is much better than it was when i started 2030 years in the narcotic. i used to be get filled at the worst price of the day generally. now for $8 per trade, can you generally hit the market within a penny of where you started. it's actually very efficient process. >> tom: but that that efficiency -- >> generally it's institutions. it's much harder to accumulate larger sizes ntd market today. retail investors buying a couple hundred shares, general very good. >> tom: does the efficiency and liquidity, as you say benefitted retail investors, does that come at a cost with more volatility like we saw in may, or with the busted trades
in apple? >> the research that i've seen actually, in the market, it's a lot less volatile than did has been. all of the high frequency trading. all of the activity in the market actually makes the price movement less spiky. if there's a big shock in the market like may 6th or the sovereign debt ciez or go back tolt credit crisis, yeah. but that's not necessarily due to high frequency trading or market structure. those are big mac row issues where people want to get out or want to get in. >> tom: those are extnal issues, not technology issue that is we're talking about, and that the sec launched an investigation as well. larry, we'll leave it there. it's a big topic of discussion for investors of all sizes. larry tabb with us. >> susie: despite those complications with the bats
exchange, markets still managed to trade higher. the dow closed up almost 35 points, the nasdaq and the s&p both gained four. a surprising pick today for the >> john corzine directly authorized the transfer of $200 million in client money to cover bad bets by the firm just before it went bankrupt. corzine previously testified he didn't know what happened to the missing $1.6 billion in customer funds. a surprising pick today for the new head of the world bank. president obama tapped dartmouth university president dr. jim kim. kim's nomination as president of the international bank is
unusual because he is a physician. world bank leaders have always been bankers or politicians. darren gersh reports. >> reporter: the world bank has decades of experience handing out foreign aid and economic advice to poor countries. so it was a surprise when the president picked as the bank's next president doctor jim kim. kim has spent much of his life battling hiv/aids around the world. >> i believe that nobody is more qualified to carry out that mission than dr. jim kim. it's time for a development professional to lead the world's largest development agency. >> reporter: the united states is the world bank's largest shareholder and an american has run it since it was created at the end of world war 2. but this year, emerging economies are seeking a lobbying for a larger role. that means kim, who has no training in finance, could face a real challenge from nigerian finance minister ngozi. okonjo-iweala also recently served as a world bank managing
director. >> in addition to the sense that it's time for the united states to relinquish this role, there's also the question of qualification. >> reporter: whoever the world bank's executive directors select, the next president will have to make a choice: are traditional loans to countries still the best way to help the poorest of the poor or should the bank focus more on tackling huge global issues like climate change and health pandemics. >> i think people want to see more impact from the world bank and to have more impact, i think they have focus more on a few sets of issues. >> reporter: dr. kim is certainly living proof of the power of economic development. when he was born in south korea 50 years ago, the country had a lower per-capita income than nigeria. today it is a high tech powerhouse. darren gersh, "nightly business report," washington. >> tom: still ahead, we catch up with doctor brian o'leary, a chicago-area physician, two years after health care reform became law.
>> susie: a week of mixed news on the housi mart was capped off by a drop in new home sales. they fell by 1.6% for their second straight monthly decline. it was much worse than expected and a sign that the housing market is still struggling. but there are some encouraging developments in the housing sector. sales of new homes have jumped over 12% since hitting their lowest point in august of 2010, while sales of existing homes are up over 35% from their lowest point. >> susie: meanwhile, bank of america announced today a plan to help struggling homeowners. it's offering bank customers with underwater mortgages a way to avoid foreclosure by becoming renters. bank of america calls it mortgage to lease. >> reporter: it's an invitation only opportunity for people facing foreclosure and the only way to participate is by getting a letter from bank of america. fewer than 1,000 borrowers in only three states-- arizona, nevada and new york will be asked to join the pilot program.
and those homeowners need to qualify before they can participate: they have to be 60 ys bind on their mtgage, they must have exhausted other options like a home loan modification or a short-sale and they are really underwater on their homes. then the homeowner can hand over the title of his or her house to bank of america, thereby eliminating their mortgage debt. in exchange, the now former- owner can rent back the same house at or below market rates. >> this new bank of america program is definitely a step in the right direction because one thing that benefits everyone, the 10% in default, but also the 90% of the rest of americans is keeping people in their homes. >> reporter: what eventually happens to the houses? bank of america says the properties will be, quote, "transitioned to investor ownership." >> susie: joining us now, megan mcgrath housing analyst at m.k.m. partners. >> hi, megan. >> hi. >> susie: so it has been a
week of mixed data on the housing market. some of it positive and some confusing and disappointing. what's your take what's going on in housing right now? >> i think europe exactly right. you're exactly right. we're in a recovery process. we're better than we were last year, but it's going to be a choppy recovery. it's not all going to be better one month than it was in the last. it's happening slowly and gradual. good things in some markets and other markets struggle. >> susie: people want to know where we are in the recovery cycle. can you give us some kind of framework? >> i think we're in the very early days. 1st, 2nd inning. and it's going to be slow in the beginning. these recoveries are always choppy. i ink it's a fragile one too. it's very early in the recovery process. so it could get sidetracked if anything happens. so we're encouraged by some of the data that we're seeing.
it's better year over year, and we're hearing about pricing firming up, and inventory levels have come down, but we caution it's a fragile recovery. we're on the way, but not on all sill cars yet. >> susie: and this week we saw building permits were up sharp leach to new levels, but today kb home reporting a big drop in new orders, and a lot of building stocks as can you see on the graphic coming up, a lot of home building stocks were down. kb 8%. beeser homes down 5%, and the others you can see between 1 and 2%. what is your take on the home building stocks? stay away from them for now? or is it an opportunity? >> i think what we're telling investmentors is we do think housing is starting to recover. this is a group thaw want to own in the housing recovery. the stocks will do well. so take opportunities like this when the stocks are do, and choose your picks wisely. >> susie: anything you're
recommending? >> toll brothers and pulty. >> susie: i want to ask you about the mortgage program is this going to help homeowners? >> it's not going to help the overall market in the beginning. it's 1,000 homes. put it in perspective. we estimate 2 million homes in foreclosure. we like the idea and hope it the work and be capted toed in a broader base across the country. >> susie: quickly, dislosures to make about toll brothers and pulty. do you own them? >> no, we do not. >> susie: we've been speaking with megan mcgrath, housing analyst.
>> tom: we certainly had a lot of news thrown at the market today. and the housing numbers, and the focus trades -- busted trades with apple, u.s. stocks rose. finishing out what was a pretty tough week. the s&p 500 was able to move into positive territory before noon eastern time, and eked out a fractional gain. but but it capped the worst week of the year for the dow. it fell 1.2%, with losses tuesday, wednesday and thursday. the nasdaq eeked out a small gain up 0.4%, trading higher and the s&p 500 also put in its worst week of 2012, falling a half percent from a week ago. contributing to today's positive stock action were the three sectors that weighed on the market yesterday. the energy and materials sectors rebounded 1%. the financial sector was just behind them. bank of america caught a bid.
it was the best performing dow industrial stock with its 2.6% gain. it sits just below its most recent multi month high, hit earlier this week. two companies cently selling stock to the public for the first time are selling more. both fashion company michael kors and online gaming firm zynga. both went public in december. kors shares fell 3.5% with more supply coming to market, but the stock has more than doubled from its initial price. zynga also fell, down about 2.5% as more shares will be sold. this stock came out at $10 per share and is about $13 tonight. another mobile gaming company, glu mobile was on the receiving end of a strong alyst endorsement. investment firm edham called the stock a stronguy and investors were buying sending shares up more than 21% on a surge of volume. the analyst points to games for smartphones as fueling glu's growth. no doubt the job market is slowing improving according to the official government statistics. online job service monster worldwide may be selling itself into that environment.
shares jumped almost % on strong volume after the c.e.o. said the firm is open to the idea of selling all or part of itself. on march 1, the firm said it was considering strategic alternatives, which is usually wall-street speak for "it's for sale." shares were below seven at the end ofebruary. they are over $10 tonight. last night's after hour's movers were among those holding back today's gains. semiconductor maker micron was the most active on the nasdaq, slipping 3.5%. meantime, nike shares couldn't hold onto earlier gains and fell 3%, after hitting an all time high last night. finally, call it the "hunger games" effect. the blockbuster teen novel series is shaping up to be a huge movie hit, but it didn't help the company behind the film lions gate. trading volume was five times heavier than usual but the stock barely budged. the "hunger games" movie opened at midnight, selling almost $20 million worth of tickets. and that's tonight's "market focus."
>> susie: two years ago today president obama signed the affordable care act into law which promised to bring better health care to all americans. on monday a rtion of that law will go before the u.s. supreme court. the justices will hear arguments on whether or not it's constitutional. health care reform has been controversial even among physicians and hospitals who are on the front lines. diane eastabrook talks to one physician about how health care reform has affected his practice. >> can you feel that? >> reporter: we met dr. brian o'leary nearly two years ago just after the affordable care act became law. during a hectic day treating patients he told me he thought h ealth care reform would bring more people into his practice. >> we'll see college students or young people who would be falling off of their parents
plan who now have access. >> reporter: during a more recent visit o'leary confirmed that is happening, but something else is happening, too. he says other patients are coming in after work-place screenings turned up things like high blood pressure, cholesterol and blood sugar levels. >> in fairly young people who have early stage disease this is something you do that has a downstream impact that's enormous. so, someone with a marginally elevated blood sugar and triglyceride who's overweighis a great candidate to have twenty years later, stroke, heart attack, blindness. >> one of the most significant changes for health care providers this year is the push to form accountable care organizations. a.c.o.s bring together doctors, hospitals, and other health care providers to better coordinate care for medicare patients. >> reporter: the goal is to prevent duplicate testing and hospital re-admissions. to coordinate care, doctors will need to switch to electronic record-keeping which can cost thousands of dollars.
as a result many physicians are sellintheir practices to hospitals or medical groups. some health care critics argue consolidation robs physicians of autonomy. dr. o'leary is part of dupage medical group. chief operating officer mary goldsher thinks this type of organized health care helps doctors focus more on patients. >> we have taken some functions that actually allow dr. o'leary more freedom not to worry about the business aspects of healthcare so that he can really be free to focus on patient care which is what i think he really got into medicine to do. >> reporter: o'leary thinks the law is making health care providers more accountable. and he's okay with that. >> i like that part that there's a target to feel very good about what you do and to be recognized in a systematic way for having done something well. >> reporter: diane eastabrook "nightly business report," naperville, illinois. >> susie: on monday, we'll be at
the u.s. supreme court where justices begin an historic debate over the health care reform act. the first question they'll consider: do they have to make a decision right now. >> tom: with only one week left in the first quarter, the stock market has seen a year's worth of gains over the past three months. tonight's market monitor is randall eley with the edgar lomax company. >> it's always great to see you, sir. wment back. >> good to see you too, tom. >> tom: 11% for the s&p 500 since january 1st. too much too fast? >> absolutely. >>om: can it sustain it? >> i think that's the best answer. i don't expect us to go into any type of bear market or chopped declines in the foreseeability future. any such actions we see doing what's clearly a presidential
election year provides an opportunity for those who have not placed mon nethe market that they should be. >> tom: do we end up the year higher than where we are today? >> i think there's a good chance of it. we are not market prognosticators. as far as trying to predict exactly where stocks will end. but the fact of life is, governmental authorities -- both the federal reserve and fiscal authorities are very involved in the economy and in the market. with money as easy as it is, it's difficult for stocks to go down and stay down for the foreseeable future. >> tom: and stock rises rise. in this environment, you're lookg densive with pharmaceutical, and pfizer. f've pfe. had a nice rally off the august low. what do you expect? >> oh, i think it's still a
good position, you're lookingly at a low pe ratio, relatively low ratio. you're also looking at a high yield. in the neighborhood of 4%. this is with the s&p 500 only 2. so you have a lot of cash coming in, which will help up to buy stocks when prices do begin to fall. >> tom: how about intel wil another one of your choices. the field is 3%, but at 27.quaelt, randall, this is the highest price since 2005. are you >> well, normally we like to buy the ones going down. this is a stock we like at a lower price. clearly would have preferred buying it lower, but i wouldn't worry about intel being overpriced until it's over 30. >> tom: and you like energy with conco phillips, and global oil play. and concerns with china. could that play wi cop? >>es. and cop, conoco phillips also
brings us price to book value. a price to the net asset value per share of this company of only one and a half. that was the price and book racialo the s&p 500 had in the depths of the early 2009 slide. so that's a double advantage. >> tom: the last time we had you here was october 21st. you liked coca-cola then up 5%, pu liked exxon mobil up about 7%. of course, this is without dividends. you still like these two? >> we certainly do. >> tom: disclosure? do you center a mixed health care, consumer and energy stocks. >> we own them all. >> tom: that's good to hear. you eat your own cooking. randall, always good to see you here. let's hope we continue to see the rally as the first quarter comes to an end. randall eley from randall and
lomax. >> susie: the deadline for filing yr federal taxes is less than a month aw and we're here to help all next week, kevin mccormally joins us with his best tax advice. he's editorial director of kiplinger's personal finance. and he's taking your tax questions at nbr.com/tax tips. and finally tonight, it's our friday feature "lou's been thinking." tonight, lou's been thinking about an emotion that can surprisingly drive us to greater things. >> i've been thinking about being scared. not the bad kind of being scared-- snakes, suspicious people following you, relatives who stay at your home too long. the good kind of scared-- the kind that prompts and prods you to achieve greater things. toward the end of my active service in the u.s. army, i was talking to a colleague about the job waiting for me after my discharge. it entailed managing 17 people and a pretty big budget. certainly different from what i had done before. "so, how are you feeling," he asked. "truthfully," i said. "scared!" he smiled and nodded and then said this, "well, if you ain't
scared, it ain't big enough for you. his voice has echoed in my ears. i now see most of the truly important steps forward i have made over the last 40 years since that day have come when there were plenty of unknowns lying in my path and plenty of challenges to face. there's nothing wrong with playing it safe, but if you asked most business people if they have achieved their goals through safety or taking calculated risks, risks would win. being a little scared calls upon that innovative side of our brain and makes us find connections and ways to proceed that aren't immediately apparent. promise to scare yourself a few times in the next month. maybe you'll find your past way of doing things just wasn't big enough for you. i'm lou heckler. >> tom: that's "nightly business port" for friday, march 23. i'm tom huds. goodnight, everyone and have a great weekend. you, too, susie. >> susie: good night, tom. i'm susie gharib. we hope to see all of you again next week. "nightly business report" is made possible by: